Lightyear Wireless Question/Answer – Illegal Compensation?

by louabbott on December 20, 2011

Q.  Lou, I read somewhere on your website that a One Billion Dollar a Year company got away with paying distributors for recruiting other distributors.

I recently signed up with Lightyear Wireless and the cost to start is $49.00 but you can also buy the next position in the system at $295.00 and all this money, the complete $295.00 is paid back in commissions.

Is this illegal?

Am I looking for trouble if I work this business because of the $295.00 fee paid back in commissions?

Thanks,
Roger G.

A.  Hi Roger, Yes – Excel Telecommunications was the first company to do that.

Essentially, while paying the commissions out of the sign up fees, they linked the payout to a requirement to bring on a certain amount of customers first.  Many of the utility MLMs do the same thing.  In most cases that has gotten them past the regulators.  But there should always be a good percentage of real customers that a company can point to outside of the comp plan.

You probably are safe.  If not done right, the company might come under regulatory scrutiny. But, if anyone aside from the company were ever questioned, it would probably only be the very top leaders.

That said, I think a smarter choice for a company is to have a product or service with enough markup to pay healthy commissions without using revenues from the signup fees or training materials for their multilevel commissions.

Lou

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{ 2 comments… read them below or add one }

Bob and Anna Bassett May 26, 2012 at 6:38 pm Thumb up 0 Thumb down 0

Lou, you are right about Excel.

We worked with them for five long, stupid, frustrating, expensive years. We left in 2004 before they went belly up. It must have been weird at Excelebration 2004 when Joe and Connie didn’t show up and many of the training sessions turned into hollerfests.

As Excel came apart, many leaders admitted that as much as 90% of their checks came from CAB’s – Customer Acquisition Bonuses – a joke of a name, as that money came straight out of the newbie’s pocket, and could be paid before one minute of long distance was sold.

Excel could have operated without all those messy switches and billing issues. Throw out all pretense of a product and just work with the 90% of the cash flow that depends on recruitment. That way you’d have a much tidier and more open pyramid than the one they held together for fifteen years.

The residual income was laughable – five levels of 1/4%, then 1% and 5%. We now call Excel 90% illegal and 10% impossible.

Many energy and communications companies are still using the Excel model. If you spend $200 to $500 to get started and receive nothing in a bag, bottle, or box, you are probably dealing with an Excel-like company who will sell you a box of air and give you permission to sell boxes of air to your friends and family and colleagues.

We’ve written an article about our experience with and analysis of Excel:
Excel Communications – Anatomy of Our Failure – The 10k Question
http://togethertothetop.com/?p=4509

Thanks for this forum, Lou. It gives some of us a chance to vent, and others a chance to be warned by our experiences.

Bob and Anna Bassett

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ray van January 26, 2012 at 12:13 am Thumb up 0 Thumb down 0

Lightyear Is a legal and an awesome company! The Cell Phone Service and employees are awesome. Perhaps the greatest opportunity to ever come along. I’m an attorney and I can confirm their program is perfectly legal and monitored by the FTC, etc…

Yes, I’m happy to be working with Lightyear and can tell you the program works and you will succeed with Lightyear!

Cheers,
Ray Van

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